Munis Gain On Low July New Issue Volume; Time To Rebalance?

By Michael Aneiro

It’s been a slow summer for muni-bond issuance, and that’s been to the benefit of muni-bond prices. So far 2014 has produced $172 billion of new bonds, according to Bank of America Merrill Lynch, which is down 14.5% from the same period last year. July is on track to produce just $21 billion in new muni issuance, including only $5 billion this week, according to Janney Montgomery Scott‘s Alan Schankel. That would be the lowest July muni output since 2010, and that low supply has led to higher prices this month. Low supply and solid demand fueled by strong summer reinvestment flows and continuing mutual fund inflows underlie the favorable technical factors supporting recent strong tax free performance,” Schankel writes today.

With munis up 0.24% this month, and high-yield munis again outperforming, BofA’s muni team says it might be time to re-evaluate your portfolio. “[L]ong duration and high yield bonds have performed so well this year that investors should consider rebalancing to a more neutral risk position,” BofA writes today.